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  • Wall Street braces for a turbulent October with jobs report on deck next week

    Wall Street braces for a turbulent October with jobs report on deck next week

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  • This 29-year-old from one of London’s poorest neighborhoods became a millionaire after selling his influencer marketing firm

    This 29-year-old from one of London’s poorest neighborhoods became a millionaire after selling his influencer marketing firm

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    Timothy Armoo, co-founder and former CEO of Fanbytes.

    Timothy Armoo

    Timothy Armoo is a 29-year-old millionaire who became rich by selling his influencer marketing firm for eight-figures, but the young, Black entrepreneur had to beat the odds to find success.

    Armoo, the co-founder and former CEO of Fanbytes, hails from what was one of the most impoverished areas in south London and as a teenager lived with his dad on a fourth floor council estate — public housing — on Old Kent Road in the borough of Southwark.

    “It was the poorest place,” Armoo told CNBC Make It in an interview. “It was at the peak of when Peckham, Brixton and Old Kent Road were having their beef [British slang for conflict] so it was in the middle of the gang warfare. Between 2005 and 2012 was the peak of the South London gangs.”

    Trust for London names Southwark as one of 19 boroughs that have “significantly” higher levels of poverty compared to England as a whole.

    Armoo knew he was poor, but he had a keen entrepreneurial spirit and managed to cobble together some money by starting his own tutoring business at 14-years-old.

    He taught fellow students math and as more students approached him for help with other subjects, he started connecting them with tutors he knew and took a cut of the fee.

    “I remember very specifically the first time I connected these two people,” he said. “Jane needed some help with chemistry, and I connected her to Harry, and Harry helped her, and I got £5 (around $6.6) in commission for connecting them, because [the business] charged £15 an hour.”

    It was only when Armoo received a scholarship to go to a private boarding school when he was just 16-years-old to complete his A-Levels — equivalent to the Advanced Placement program in the U.S. — that his entire view of wealth changed.

    “I remember one day this kid got picked up in a helicopter,” he recalled. “It opened up my eyes that there is a way to build wealth and you don’t have to be Richard Branson. There’s a whole world of people in between there.”

    He started to realize that “money was a tool” to change his life and the fastest way to escape poverty was to start his own business.

    “When I was growing up on that fourth floor council estate, I would always say to myself ‘This is temporary. This is temporary. This is temporary,’” he said. “I didn’t get to choose the circumstances I was in at 10 years old … but at least I got to decide what ends up happening.”  

    Here’s how Armoo went from living in a council estate to starting his own business and then becoming a millionaire before the age of 30.

    Your first business doesn’t need to be a ‘billion dollar idea’

    Armoo was 17-years-old and still completing his A-Levels when he sold his first business, an online blog called Entrepreneur Express, for £110,000, after only 11 months of running it.

    “Everyone’s aspiration was to go to Oxbridge [The Universities of Oxford and Cambridge] and mine was just ‘I want to make money and I want to get out of my s—ty situation,’” Armoo said.

    The 29-year-old interviewed high-profile figures for Entrepreneur Express from the likes of Virgin Group co-founder Richard Branson, the face of the British TV show “The Apprentice” Alan Sugar and actor James Caan, but making the blog profitable was a challenge.

    Initially he had a print version of the blog ready to be taken in by university society groups but as the deadline drew closer, he realized he didn’t have enough advertising to sustain the print publication.

    The young entrepreneur then turned his attention to placing advertisements on the online blog. “This is where I had my success,” he said.

    He said his “hack” was the distribution of content from the blog via viral social media accounts on Instagram and Facebook such as meme pages and feel-good quote pages.

    Armoo would package the articles into social media posts with a hook like “10 quotes to…” and this would drive people from the post to his site.

    “The way that we made money was by two things: one was programmatic advertising — so just banner ads, but I would also then sell sponsored slots to tax firms, law firms, and accountancy firms so they could get a direct ROI [return on investment.]”

    Armoo said your first business doesn’t need to be “a billion dollar idea.” Instead “your first business should just get you on the first money ladder.”

    He echoed the advice of the late investment guru Charlie Munger who said that making the first $100,000 is the hardest “but you gotta do it.”

    Armoo agreed saying: “If you optimize for that first £100,000 … you slog, and you go crazy for it, life just becomes easier, because then you know a bit of the playbook… now, at the very least, you have a financial cushion to make choices which are not as risky.”

    “You build wealth by selling the business”

    Armoo co-founded Fanbytes with Ambrose Cooke and Mitchell Fasanya in 2017.

    Tim Armoo

    Armoo considers himself an early pioneer in the burgeoning creator economy industry because he co-founded the influencer marketing firm Fanbytes in 2017 with Ambrose Cooke and Mitchell Fasanya.

    Fanbytes’ goal was to connect brands with influencers to create advertising campaigns — a popular marketing strategy at the time as companies transitioned from traditional advertising to using influencers on social media to sell products.

    Their strategy worked as Fanbytes amassed a notable roster of clients from Nike, Samsung, Amazon and ITV, Armoo said.

    One 2016 study by TapInfluence found that social media influencer marketing was 11 times more effective than banner ads on a website, which is why brands were flocking to influencers, according to CNBC reporting.

    “I saw the rise of influencer marketing in the U.S.,” Armoo said and he decided to replicate the idea in the U.K.

    You don’t always need to invent something new as an entrepreneur, instead you can “service existing demand,” Armoo advised.  

    The company was “raising dribs and drabs,” across different stages before ultimately raising £2 million in funding.

    “First ever bit of investment was like 15 grand, then 40 grand, and then 120 grand, and then 300 grand, and then 600 grand,” Armoo said.

    His work with Fanbytes landed him on the Forbes 30 Under 30 list in 2021, and soon after in October that year, offers started rolling in from people wanting to purchase Fanbytes.

    He then appointed a bank to coordinate deals for the company which went on to find six companies interested in acquiring Fanbytes.

    Armoo, who was 27-years-old at the time, and his co-founders sold Fanbytes to Brainlabs, a global digital marketing agency, in an eight-figure deal in May 2022, which made them all multi-millionaires.

    “The aim was always to build something that could be sold,” Armoo said. “I spoke to this guy once when I was pretty early on in my journey, and he said that you can make money while running a business, but you build wealth by selling the business.”

    Armoo always knew that he didn’t want to run Fanbytes for the rest of his life.

    “Fanbytes could have been selling shoelaces to frogs and I still would have been passionate if I thought this is a business we are building and it has the end goal of being something that can achieve financial security,” he said.

    ‘I never saw myself as a Black entrepreneur’

    Armoo and his co-founders sold Fanbytes to Brainlabs in May 2022.

    Timothy Armoo

    Black founders often struggle to raise capital. In fact, Black-founded startups in the U.S. only raised 0.48% of all venture dollars allocated in 2023, per Crunchbase data previously reported by CNBC.

    This follows a decline in funding being given to Black-owned businesses since 2020, after the murder of George Floyd and the social justice movement that followed his death.

    Meanwhile, 87% of non-white founders said they faced more barriers to fundraising compared with 79% of white founders, according to Atomico’s State of European Tech Report 2023.

    Armoo says it was all about perspective and believed that being Black didn’t hold him back.

    “Everyone remembered the bearded Black guy in a room full of white people. Everyone remembers that and so for me, it increases how memorable you are,” he said about his experience of going to events to meet investors.

    He explained that you can either walk into a room and feel insecure because there aren’t that many people that look like you, or you can believe that that factor will help you standout.

    “I never saw myself as a Black entrepreneur. I always just saw myself as an entrepreneur,” he said.

    “I think maybe I’m too logical for my own good. I was like ‘investors want to make money. This business is going to make them money. I’m going to show them how it makes them money.’ That’s it. I didn’t really think they cared if it was coming from the mouth of a white guy or a Black guy.”

    Now, as a 29-year-old millionaire, Armoo is confident that this world view has “served him well.”

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  • CNBC Daily Open: U.S. seeks Boeing guilty plea

    CNBC Daily Open: U.S. seeks Boeing guilty plea

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    The Dow Jones Industrial Average rose about 3.8% in the first six months of the year, lagging way behind the Nasdaq, up 18.1%, and the S&P 500, which jumped 14.5% — as investors plowed into artificial intelligence-related stocks.

    Brendan Mcdermid | Reuters

    This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Dow lags tech rally 
    The
    Dow Jones Industrial Average rose about 3.8% in the first six months of the year, lagging way behind the Nasdaq, up 18.1%, and the S&P 500, which jumped 14.5% as investors plowed into artificial intelligence-related stocks. On Friday, the S&P 500 and Nasdaq hit record highs before pulling back. The yield on the 10-year Treasury rose as investors digested the latest inflation data. U.S. oil prices rose for the third straight week amid fears of a war between Israel and the Iran-backed militia Hezbollah.

    Boeing ‘guilty plea’ 
    U.S. prosecutors plan to seek a guilty plea from Boeing over a charge related to two fatal 737 Max crashes in 2018 and 2019, attorneys for the victims’ family members said. The Justice Department is reviewing whether Boeing violated a 2021 settlement that shielded the company from federal charges. Boeing agreed then to pay a $2.5 billion penalty for a conspiracy charge tied to the crashes. The DOJ revisited the agreement after a door panel blew out of a new 737 Max 9 in January, sparking a new safety crisis.

    Under fire
    Nike CEO John Donahoe faces growing discontent as the company’s stock plummeted 20% on Friday, its worst day since 1980, after forecasting a significant decline in sales. As Wall Street digested the dismal outlook from the world’s largest sportswear company, at least six investment banks downgraded Nike’s stock. Analysts at Morgan Stanley and Stifel took it a step further, specifically calling the company’s management into question.

    Bitcoin windfall
    Mt. Gox, a bankrupt Japanese bitcoin exchange, is set to repay creditors nearly $9 billion worth of Bitcoin following a 2011 hack. The court-appointed trustee overseeing the exchange’s bankruptcy proceedings said distributions to the firm’s roughly 20,000 creditors would begin this month. The payout is likely to be a windfall for those who waited a decade, with Bitcoin’s value surging from around $600 in 2014 to over $60,000 today. One claimant, Gregory Greene, could potentially receive $2.5 million for his $25,000 investment.

    Inflation cooling
    A key inflation measure, watched closely by the Federal Reserve, slowed to its lowest annual rate in over three years in May, with the core personal consumption expenditures price index rising 2.6% from a year ago. “This is just additional news that monetary policy is working, inflation is gradually cooling,” San Francisco Fed President Mary Daly told CNBC’s Andrew Ross Sorkin during a “Squawk Box” interview. “That’s a relief for businesses and households who have been struggling with persistently high inflation. It’s good news for how policy is working.”

    [PRO] Rally will broaden
    The tech sector has driven market performance in 2024, with the S&P 500 tech group up 28% and Nvidia soaring 149%, while small-caps have lagged. Oppenheimer’s chief market strategist John Stoltzfus believes the rally will broaden. CNBC’s Lisa Kailai Han looks at the reasons behind his call

    The bottom line

    The New York Times editorial board has lost faith in President Joe Biden, calling for him to step aside. Iranians will need another go at electing a new president, French voters cast their votes in the first round of snap elections that saw big gains for Marie Le Pen's far-right party and Brits will go to the polls on Thursday.

    It's a busy political environment for markets to navigate. Wall Street has shown remarkable resilience thanks to the AI-powered rally in the first half of the year, which has seen the Nasdaq soar 18% so far. Nvidia is up almost 150%. There could be more to come; Bank of America believes Nvidia and Apple could still deliver "superior returns."

    While one of the biggest bulls on the Street expects the rally to broaden away from the megacaps, Wall Street wasn't feeling any love for Nike's CEO. The company had its worst day of trading since its IPO in December 1980, losing $28 billion in market cap on Friday after slashing its sales forecasts.

    John Donahoe was brought in from eBay to transform the athletic apparel giant's digital channels. The company ditched its retail partners, became too dependent on its aging sneaker ranges and lost ground to new contenders Hoka and On. It'll certainly make an interesting case study for MBA programs for all the wrong reasons. As Wall Street questioned Donahoe's position, he still had the approval of its founder.

    Friday also saw the Fed's favored inflation measure come in line with expectations, raising the prospect of interest rate cuts later this year.

    "I really think the Fed should tee up a cut at the July 31 meeting, confirm it at Jackson Hole in August and do it in September," Wharton finance professor Jeremy Siegel told CNBC's "Squawk on the Street." He added that one or maybe one-and-a-half rate cuts have already been priced in.

    "I actually think there will be more because there might be a little bit more softness in the economy and better inflation numbers, both of those feeding better rates," he continued. Siegel also said it is "hard to say" where the bull market's trajectory currently stands.

    In a four-day trading week — markets are closed for the July 4 Independence Day holiday — the big economic number to watch is the June jobless data on Friday. CNBC's Sarah Min has more on what to expect.

     — CNBC's Lisa Kailai Han, Yun Li, Jeff Cox, Leslie Josephs, Gabrielle Fonrouge, Hakyung Kim, Brian Evans, Spencer Kimball, Ryan Browne and MacKenzie Sigalos contributed to this report.

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  • The state of women’s sports: Top executives weigh in on parity, media share and NIL regulations

    The state of women’s sports: Top executives weigh in on parity, media share and NIL regulations

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    Guard Caitlin Clark #22 of the Iowa Hawkeyes listens as the crowd cheers after breaking the NCAA women’s all-time scoring record during the game against the Michigan Wolverines at Carver-Hawkeye Arena on February 15, 2024 in Iowa City, Iowa. 

    Matthew Holst | Getty Images

    Women’s sports reached an inflection point in 2023, propelled by major new broadcast deals, once-in-a-lifetime players and record-breaking audiences that dramatically changed the sports landscape.

    From Caitlin Clark fever in Iowa to a packed house of 92,000 fans for women’s volleyball in Nebraska, women’s sports have never been more at the forefront.

    And it’s not slowing down.

    Revenue generated by women’s elite sports could surpass $1 billion this year, a 300% increase from 2021, according to estimates from Deloitte.

    Bigger media deals and more commercial sponsors are driving record valuations for women’s sports, with several teams’ values expected to exceed $100 million in 2024, according to Deloitte.

    Last year saw record media deals for women’s sports as the NCAA and NWSL both inked groundbreaking agreements. And investors from private equity to celebrities are lining up to get in the game.

    Yet, there’s still a lot of work to be done, specifically, in the areas of equal pay, prime-time access and even the need for more historical data.

    CNBC surveyed some of the most high-powered women executives in sports, ranging from league commissioners to team owners and CEOs, to hear their thoughts on the state of women in sports. Some of their answers have been edited for style, clarity and length.

    What do you see as the primary obstacle hindering the growth of women’s sports?

    Renie Anderson, executive vice president and chief revenue officer for the NFL: The obstacle, or really the opportunity, for today is to continue to amplify the spectacular athleticism of these women. Rather than be shocked and surprised that women are spectacular at sport, we need to do a better job of weaving in the message of greatness when highlighting the greatness in men’s sports. It’s there. It just doesn’t get the attention it deserves.

    Jessica Berman, National Women’s Soccer League Commissioner

    Jesse Grant | CNBC

    Jessica Berman, commissioner of the National Women’s Soccer League: Because the world has woken up to women’s sports, the expectations on how fast this can grow, from all stakeholders, is really challenging. We’re 100 years behind men’s sports, and so it’s not to say that we should move slowly. It is to say that it is challenging to sort of build the plane as quickly as so many stakeholders expect it to be built — and to do it in a way that’s sustainable and commercially viable.

    WNBA Commissioner Cathy Engelbert speaks to the media to award Breanna Stewart #30 of the New York Liberty with the 2023 Kia WNBA Most Valuable Player Award before the game against the Connecticut Sun during round two game two of the 2023 WNBA playoffs on September 26, 2023 in Brooklyn, New York. 

    David Dow | Getty Images

    Cathy Engelbert, commissioner of the Women’s National Basketball Association: One of the obstacles is the undervaluation of our assets. Whether it’s a patch on the uniform or an ad buy on a broadcast, we need to change the model. It’s based on decades-old spreadsheet models that are tailored to men’s sports and in those models, a lot of things that companies are now supporting in women’s sports aren’t being accounted for like their diversity, their community, the fact that they are not the “one and done” type.

    Jessica Gelman speaks during the 15th Annual Sports Business Journal Awards ceremony at New York Marriott Marquis Hotel on May 18, 2022 in New York City. 

    John Lamparski | Getty Images

    Jessica Gelman, KAGR CEO and founder of the MIT Sloan Sports Analytics Conference: A major obstacle has been available data on performance which supports and enhances storytelling. These stories create interest and drive (i.e. see Caitlin Clark’s NCAA scoring record quest). This past year the MIT Sloan Sports Analytics Conference donated to Sports-Reference to support the addition of college women’s data back to 1987.

    Jayna Hefford, senior vice president of operations for the Professional Women’s Hockey League: Women’s sports still struggle to secure prime broadcast windows, consistent airtime and traditional media coverage. Furthermore, the scarcity of traditional media coverage has historically forced women’s teams and leagues, as well as women-owned media companies, to take the lead in promoting their own narratives. This limited visibility has made it challenging to attract brand support, even though research indicates that companies investing in women’s sports see lucrative returns.

    Haley Rosen, Just Women’s Sports

    Source: Just Women’s Sports

    Haley Rosen, CEO and founder of Just Women’s Sports: One of the biggest obstacles hindering the progress of women’s sports today is relying on the legacy platforms. Legacy platforms aren’t set up to support women’s sports and build on the momentum. Yes, they’ll air the games. But there’s only so much time in the day for the shoulder programming and coverage needed to amplify the women’s leagues, and legacy platforms are always going to prioritize men’s sports. Viewership numbers are rising, but the relative percentage of women’s sports coverage on legacy platforms hasn’t changed.

    Mollie Marcoux Samaan, LPGA Commissioner, speaks during the State of the Association press conference during the first round of the CME Group Tour Championship at Tiburon Golf Club on November 16, 2023 in Naples, Florida. 

    Michael Reaves | Getty Images

    Mollie Marcoux Samaan, commissioner of the Ladies Professional Golf Association: Women’s sports today face two primary obstacles: investment and exposure. At the LPGA we’ve made some great strides. Our total revenue has gone up 65% in the last four years, and total purses — the prize funds players’ play for each week — has grown 70% since 2021. That’s because of investment, because of partnerships, because of corporate decision makers seeing not only the significant commercial value of the LPGA but also the opportunity to have a positive impact on the world.

    How can women’s sports leverage milestone events like those seen in 2023 to further expand reach?

    NEW YORK, NY – AUGUST 22: USTA President Katrina Adams speaks during the Louis Armstrong Stadium Dedication Ceremony at USTA Billie Jean King National Tennis Center on August 22, 2018 in New York City. (Photo by Steven Ryan/Getty Images)

    Steven Ryan | Getty Images Sport | Getty Images

    Katrina Adams, former pro tennis player and ex-CEO of the United States Tennis Association: I think what the Women’s Tennis Association has done for many years, is shown other professional sports what can be achieved if they use your voice and their talent, that they can survive. When you look at the players of today — you know, we talk about the [Caitlin Clark types] and Sabrina Ionescu and Coco Gauff, who was the highest paid athlete last year — there’s so many opportunities for these young women to use their platform to really speak up and speak out on what it means to be on a level playing field week in and week out.

    Berman: I think we have to go from these being moments to being part of a movement, so that we get out of the default of having these reference points be episodic, or transactional or in isolation, so that it can translate to more sustainable growth and investment. I think the more we can demonstrate and talk about some of those consistent data points that show that the business is actually being built in a more consistent way, the easier it’ll be to debunk the narrative that these are one-off success stories.

    Pamela Duckworth

    Source: FuboTV

    Fanduel CEO Amy Howe attends The Future of Everything presented by the Wall Street Journal at Spring Studios on May 18, 2022 in New York City.

    Steven Ferdman | Getty Images

    Amy Howe, FanDuel CEO: Women’s sports need to continue to position their star athletes (i.e. Ionescu, A’ja Wilson and Breanna Stewart of WNBA) in the mainstream at parity with their male counterparts – the 3-point competition was a perfect example. Not surprisingly, all of this investment and support is fueling greater performance from female athletes which is driving added success in places like FanDuel’s business, where we saw a 270% increase in bet counts on women’s sports and 101% increase in handle, or amount wagered. It’s a real flywheel effect.

    Rosen: There are tens of millions of sports fans out there waiting to be onboarded into this space. We have to make it easy and fun for them to be a women’s sports fan and not just rely on the stand-alone moments. That means meeting them every day on their feeds, creating content that engages them and keeps them continually connected to this space. 

    How do name, image and likeness regulations factor into the growth of women’s sports?

    Adams: I think it’s an opportunity for our women to finally be recognized and actually make a living. The men, they’ve had this opportunity for years, for decades, “under the table,” if you will, now the women are able to do it legally with the NIL. For them to make a little money and really grow the sport in their communities, in their cities in their college towns, etc. I think it’s great. They’re learning how to become entrepreneurs at a younger age, and they’re doing extremely well.

    A portrait of Renie Anderson NFL SVP, Chief Revenue Officer.

    Source: NFL

    Anderson: I think NIL helps likely a small few through their social media. I’m not sure outside of a handful of amazing athletes/influencers it’s going to be spread out throughout college sports for women, like it is for football for men. But I guess we wait and see. I don’t think it hurts, but for those few women that do benefit, it’s an opportunity for them to lift up other women.

    Duckworth: NIL opens doors for female athletes to build their own brands in ways that weren’t possible before. Why shouldn’t a female athlete make money the same way her male counterpart can? Money equals independence in my book. Kudos to major sports stars like Angel Reese or Caitlin Clark on showing young women just what can be built. 

    Billie Jean King and Jayna Hefford walk to centre ice for the ceremonial puck drop before Toronto plays New York in their PWHL hockey game at the Mattamy Athletic Centre on January 1, 2024 in Toronto, Ontario, Canada. 

    Mark Blinch | Getty Images

    Hefford: The positive impact of NIL on women’s college athletics has reverberated throughout women’s sports, creating a scenario where all boats rise. As more female athletes become household names, the investment in women’s sports is likely to increase, encouraging more young girls to start — or continue participating in — sports.

    Rosen: On paper, it’s great and we should celebrate anything that helps women athletes grow their brand and monetize their talents. There are obviously still some details that need to be ironed out, especially when it comes to team dynamics and the potential for NIL deals to force players into taking the short-term profit at the cost of their long-term development.

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  • Foot Locker shares fall after heavy promotions lead to holiday-quarter losses

    Foot Locker shares fall after heavy promotions lead to holiday-quarter losses

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    The Foot Locker logo is displayed in a store on May 19, 2023 in San Francisco, California. 

    Justin Sullivan | Getty Images

    Shares of Foot Locker fell in premarket trading Wednesday after the sneaker retailer reported a holiday-quarter loss and issued weak guidance for the current year.

    Here’s how the company did in its fourth fiscal quarter, compared with estimates from analysts surveyed by LSEG, formerly known as Refinitiv:

    • Earnings per share: 38 cents adjusted vs. 32 cents expected
    • Revenue: $2.38 billion vs. $2.28 billion expected

    The company swung to a loss in the three-month period that ended Feb. 3. Foot Locker lost $389 million, or $4.13 per share, compared with an income of $19 million, or 20 cents per share, a year earlier.

    Sales rose slightly to $2.38 billion, up about 2% from $2.34 billion a year earlier.

    For fiscal 2024, Foot Locker is expecting sales to be between down 1% and up 1%, compared to estimates of down half a percent, according to LSEG.

    It expects adjusted earnings per share to be between $1.50 and $1.70, compared with estimates of $1.40 to $2.30, according to LSEG.

    It’s been a little over a year since CEO Mary Dillon took the helm of Foot Locker. During her tenure, sales have consistently fallen as the retailer grappled with a changing mix of sneaker brands and a target consumer that has felt the brunt of inflation more acutely than those in higher income brackets. 

    Foot Locker has also been repositioning its Champs Sports brand and has grappled with high inventory levels that, unlike its peers, it has struggled to curb.

    In her past life as Ulta Beauty’s chief executive, Dillon skillfully won over buzzy beauty brands and turned the company into a powerhouse cosmetics retailer. When she took over as Foot Locker’s top boss in Sept. 2022, she was seen as the savior the legacy retailer sorely needed. 

    While Dillon inherited a slew of problems that existed long before she took over, and is still highly regarded across the retail industry, her turnaround of Foot Locker has come more slowly than some analysts had expected. 

    During its fiscal third quarter, Foot Locker eked out surprise beats on the top and bottom lines. Dillon told investors the company was making progress with its turnaround initiatives. The company inked a new marketing deal with the NBA, made plans to enter India and said the holiday quarter was off to a strong start.

    Last March, Dillon touted a renewed and revitalized relationship with Nike, which has long been the largest driver of Foot Locker’s sales. She has also sought to reduce the company’s reliance on the sneaker giant as it has focused on driving direct sales and squeezing out wholesalers.

    The relationship between the two brands still appears to be in a state of flux. On earnings calls, Nike routinely points to Dick’s Sporting Goods and JD Finish Line as its treasured wholesale partners.

    But in mid-February, Foot Locker announced a new partnership with its longtime supplier. The partnership, dubbed The Clinic, brings together Foot Locker, Nike and Jordan Brand, and will feature “interactive activations, high reach media, real life basketball clinics, social media content, community events and more.” 

    The partnership officially launched during the 2024 NBA All-Star Game in Indianapolis, In. 

    Read the full earnings release here

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  • Companies — profitable or not — make 2024 the year of cost cuts

    Companies — profitable or not — make 2024 the year of cost cuts

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    Mathisworks | Digitalvision Vectors | Getty Images

    Corporate America has a message for Wall Street: It’s serious about cutting costs this year.

    From toy and cosmetics makers to office software sellers, executives across sectors have announced layoffs and other plans to slash expenses — even at some companies that are turning a profit. Barbie maker Mattel, PayPal, Cisco, Nike, Estée Lauder and Levi Strauss are just a few of the firms that have cut jobs in recent weeks.

    Department store retailer Macy’s said it will close five of its namesake department stores and cut more than 2,300 jobs. JetBlue Airways and Spirit Airlines have offered staff buyouts, while United Airlines cut first-class meals on some of its shortest flights.

    As consumers watch their wallets, companies have felt pressure from investors to do the same. Executives have sought to show shareholders that they’re adjusting to consumer demand as it returns to typical patterns or even softens, as well as aggressively countering higher expenses.

    Airlines, automakers, media companies and package giant UPS are all digesting new labor contracts that gave raises to tens of thousands of workers and drove costs higher.

    Companies in years past could get away with passing on higher costs to customers who were willing to splurge on everything from new appliances to beach vacations. But businesses’ pricing power has waned, so executives are looking for other ways to manage the budget — or squeeze out more profits, said Gregory Daco, chief economist for EY.

    “You are in an environment where cost fatigue is very much part of the equation for consumers and business leaders,” Daco said. “The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates.”

    There are some exceptions to the recent cost-cutting wave: Walmart, for example, said last month that it would build or convert more than 150 stores over the next five years, along with a more than $9 billion investment to modernize many of its current stores.

    And some companies, such as banks, already made deep cuts. Five of the largest banks, including Wells Fargo and Goldman Sachs, together eliminated more than 20,000 jobs in 2023. Now, they’re awaiting interest rate cuts by the Federal Reserve that would free up cash for pent-up mergers and acquisitions.

    But cost reductions unveiled in even just the first few weeks of the year amount to tens of thousands of jobs and billions of dollars. In January, U.S. companies announced 82,307 job cuts, more than double the number in December, while still down 20% from a year ago, according to Challenger, Gray and Christmas.

    And the tightening of months prior is already showing up in financial reports.

    So far this earnings season, results have indicated that companies have focused on driving profits higher without the tailwind of big price increases and sales growth.

    As of mid-February, more than three-quarters of the S&P 500 had reported fourth-quarter results, with far more earnings beats than revenue beats. The quarter’s earnings, measured by a composite of S&P 500 companies, are on pace to rise nearly 10%. Revenues, however, are up a more modest 3.4%.

    Layoffs, flight cuts and store closures

    While companies’ drive for higher profits isn’t new, they have made bolstering the bottom line a priority this year.

    Downsizing has rippled across the tech industry, as companies followed the lead of Meta’s 2023 cuts, which many analysts credited with helping the social media giant rebound from a rough 2022. CEO Mark Zuckerberg had dubbed 2023 the “year of efficiency” for the parent of Facebook and Instagram, as it slashed the size of its workforce and vowed to carry forward its leaner approach.

    In recent weeks, Amazon, Alphabet, Microsoft and Cisco, among others, have announced staffing reductions.

    And the layoffs haven’t been contained to tech. UPS said it was axing 12,000 jobs, saving the company $1 billion, CEO Carol Tome said late last month, citing softer demand. Many of the largest retail, media and entertainment companies have also announced workforce reductions, in addition to other cuts.

    Warner Bros. Discovery has slashed content spending and headcount as part of $4 billion in total cost savings from the merger of Discovery and WarnerMedia. Disney initially promised $5.5 billion in cost reductions in 2023, fueled by 7,000 layoffs. The company has since increased its savings promise to $7.5 billion, and executives suggested in its Feb. 7 quarterly earnings report that it may exceed that target.

    Last week, Paramount Global announced hundreds of layoffs in an effort to “operate as a leaner company and spend less,” according to CEO Bob Bakish. Comcast’s NBCUniversal, the parent company of CNBC, has also recently eliminated jobs.

    JetBlue Airways, which hasn’t posted an annual profit since before the pandemic, is deferring about $2.5 billion in capital expenditures on new Airbus planes to the end of the decade, culling unprofitable routes and redeploying aircraft in addition to the worker buyouts.

    Delta Air Lines, which is profitable, in November said it was cutting some office jobs, calling it a “small adjustment.”

    Some cuts are even making their way to the front of the cabin. United Airlines, which also posted a profit in 2023, at the start of this year said it would serve first-class meals only on flights more than 900 miles, up from 800 miles previously. “On flights that are 301 to 900 miles, United First customers can expect an offering from the premium snack basket,” according to an internal post.

    Several of the country’s largest automakers, such as General Motors and Ford Motor, have lowered spending by billions of dollars through reduced or delayed investments on all-electric vehicles. The U.S.-based companies as well as others, such as Netherlands-based Stellantis, have recently reduced headcount and payroll through voluntary buyouts or layoffs.

    Even Chipotle, which reported more foot traffic and sales at its restaurants in the most recently reported quarter, is chasing higher productivity by testing an avocado-scooping robot called the Autocado that shortens the time it takes to make guacamole. It’s also testing another robot that can put together burrito bowls and salads. The robots, if expanded to other stores, could help cut costs by minimizing food waste or reducing the number of workers needed for those tasks.

    Shifting patterns

    Industry experts have chalked up some recent cuts to companies catching their breath — and taking a hard look at how they operate — after an unusual four-year stretch caused by the pandemic and its fallout.

    EY’s Daco said the past few years have been marked by a mismatch in supply and demand when it comes to goods, services and even workers.

    Customers went on shopping sprees, fueled by government stimulus and less experience-related spending. Airlines saw demand disappear and then skyrocket. Companies furloughed workers in the early pandemic and then struggled to fill jobs.

    He said he expects companies this year to “search for an equilibrium.”

    “You’re seeing a rebalancing happening in the labor markets, in the capital markets,” he said. “And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth.”

    The auto industry, for example, faced a supply issue during much of the Covid pandemic but is now facing a potential demand problem. Inventories of new vehicles are rising — surpassing 2.5 million units and 71 days’ supply toward the end of 2023, up 57% year over year, according to Cox Automotive — forcing automakers to extend more discounts in an effort to move cars and trucks off dealer lots.

    Automakers have also been contending with slower-than-expected adoption of EVs.

    David Silverman, a retail analyst at Fitch Ratings, said companies are “feeling a bit heavy as sales growth moderates and maybe even declines.”

    Cost cuts at UPS, Hasbro and Levi all followed sales declines in the most recent fiscal quarter. Macy’s, which reports earnings later this month, has said it expects same-store sales to drop, and there’s early evidence that may come to bear: Consumers pulled back on spending in January, with retail sales falling 0.8%, more than economists expected, according to the latest federal data.

    Most major retailers, including Walmart, Target and Home Depot, will report earnings in the coming weeks.

    Credit ratings agency Fitch said it doesn’t expect the U.S. economy to tip into recession, but it does anticipate a continued pullback in discretionary spending.

    “Part of companies’ decision to lower their expense structure is in line with their views that 2024 may not be a fantastic year from a top-line-growth standpoint,” Silverman said.

    Plus, he added, companies have had to find cash to fund investments in newer technology such as infrastructure that supports e-commerce, a resilient supply chain or investments in artificial intelligence.

    Forward momentum

    Companies may have another reason to cut costs now, too. As they see other companies shrinking the size of their workforces or budgets, there’s safety in numbers.

    Or as Silverman noted, “layoffs beget layoffs.”

    “As companies have started to announce them it becomes normalized,” he said. “There’s less of a stigma.”

    Even with rolling layoffs, the labor market remains strong, which may help explain why Wall Street has by and large rewarded those companies that have found areas to save and returned profits to shareholders.

    Shares of Meta, for example, almost tripled in price in 2023 in that “year of efficiency,” making the stock the second-best gainer in the S&P 500, behind only Nvidia. After laying off more than 20,000 workers in 2023, Meta on Feb. 2 announced its first-ever dividend and said it expanded its share buyback authorization by $50 billion.

    UPS, fresh from job cuts, said it would raise its quarterly dividend by a penny.

    Overall, dividends paid by companies in the S&P 500 rose 5.05% last year, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, and he estimated they will likely increase nearly 5.3% this year.

    — CNBC’s Michael Wayland, Alex Sherman, Robert Hum, Amelia Lucas and Jonathan Vanian contributed to this story.

    Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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  • Klarna to debut $7.99 monthly plan as buy now, pay later firm seeks new revenue sources ahead of IPO

    Klarna to debut $7.99 monthly plan as buy now, pay later firm seeks new revenue sources ahead of IPO

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    Swedish buy now, pay later firm Klarna unveils a $7.99 monthly subscription plan called Klarna Plus

    Courtesy: Klarna

    Swedish fintech firm Klarna is launching a monthly subscription plan in the U.S. to lock in its heaviest users ahead of an expected initial public offering this year, the company told CNBC.

    The product is set to be announced later Wednesday and will cost $7.99 per month, the Stockholm-based company said.

    Users of the subscription plan, named Klarna Plus, will get service fees waived, earn double rewards points and have access to curated discounts from partners including Nike and Instacart, according to Chief Marketing Officer David Sandstrom.

    Buy now, pay later services such as Klarna and Affirm have surged in popularity in recent years as more Americans rely on a new, fintech-enabled form of credit. The services typically break up a purchase into four payments.

    When Klarna users shop outside the firm’s network of 500,000 retailers — at places such as Walmart, Target, Amazon and Costco — they pay $1 to $2 in transaction fees.

    “The main proposition of Klarna Plus right now is that you don’t pay any service fees,” Sandstrom said. “So if you love Klarna and if you love shopping at Target and Walmart, it makes a ton of sense financially.”

    Klarna’s IPO year

    Klarna’s monthly plan is the latest example of a fintech player building out its offerings to boost recurring revenue. Wall Street investors tend to favor subscription revenue because of its predictability versus one-time transactions. Rival Affirm has explored its own subscription plan, though it hasn’t released one yet.

    The approach is especially timely as Klarna nears an IPO that could value it at more than $15 billion, Sky News reported in November. Klarna CEO Sebastian Siemiatkowski told Bloomberg this week that a listing in the U.S., the firm’s largest market, was probably imminent.

    Achieving that valuation would be a redemption of sorts for Klarna. The company was Europe’s most valuable startup before a collapse made it the poster child for so-called “down rounds” of funding. Klarna’s valuation sank 85% to $6.7 billion in 2022 as rising interest rates reined in high-flying fintech firms.

    Savings sweetener

    Klarna Plus could help persuade investors that the company can grow beyond its core product. The subscription, which was piloted in Utah for six months last year, is a “no brainer” for about 15% of the firm’s heaviest users, Sandstrom said. The company said it has about 37 million American customers.

    “The thing we need to prove to ourselves and to the market is that we can add a new kind of revenue stream to Klarna,” Sandstrom said. “That’s something that a lot of companies have struggled to do.”

    Up next for the U.S. is a high-yield savings account, Sandstrom said. Klarna Plus customers would probably earn a higher interest rate on savings than nonusers, he added.

    “If you look at our business from the outside, it looks very much like ‘buy now, pay later,'” Sandstrom said. But “a world of opportunity opens up with someone you’ve helped in a financial relationship. You get to say, ‘Hey, wouldn’t it make sense to get the Klarna card?'”

    Correction: This story has been updated to correct that Klarna’s subscription plan, Klarna Plus, was piloted in Utah after the company corrected information it had earlier provided.

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  • Top Wall Street analysts prefer these 3 stocks for long-term growth

    Top Wall Street analysts prefer these 3 stocks for long-term growth

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    Workers install a Nike logo lamp outside the Wukesong Arena in Beijing, August 28, 2019.

    Tingshu Wang | Reuters

    The U.S. stock market started 2024 on a dismal note, but investors will need to look past the short-term uncertainty.

    Rather than worrying about the slow start to the year, investors should focus on adding stocks with attractive long-term prospects to their portfolios.

    With that in mind, here are three stocks favored by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.

    Booking Holdings

    This week’s first pick is Booking Holdings (BKNG), an online travel agency. The company is benefiting from strong travel demand despite a challenging macroeconomic backdrop.

    Recently, Tigress Financial Partners analyst Ivan Feinseth reiterated a buy rating on Booking Holdings and increased his price target to $4,285 from $3,855. The analyst thinks that the company is well-positioned to gain from the secular shift in consumer spending trends toward travel and entertainment.

    The analyst expects BKNG to witness higher bookings, driven by the continued strength in demand for travel coupled with the company’s artificial intelligence initiatives. In particular, he anticipates that the company’s AI advancements, including its Connected Trip offering, will bring down costs and enhance operating efficiencies.    

    “BKNG’s strong balance sheet and cash flow will continue to drive ongoing investment in key growth initiatives and the resumption of share repurchases,” said Feinseth.

    Overall, the analyst expects Booking Holdings to generate a higher return on capital, fueled by its dominant market position, solid execution, strong brand equity, diversified global presence and a technologically advanced platform.

    Feinseth ranks No. 253 among more than 8,600 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 10.9%. In addition, see Booking Holdings Insider Trading Activity on TipRanks. 

    Nike

    Athletic apparel and footwear company Nike (NKE) recently reported better-than-anticipated fiscal second-quarter earnings per share. However, the stock declined following the results as the company’s revenue fell short of estimates. Also, Nike lowered its full-year revenue outlook due to increased macro challenges, mainly in China and EMEA (Europe, the Middle East and Africa).

    Despite the mixed results, Baird analyst Jonathan Komp reiterated a buy rating on Nike stock with a price target of $140. The analyst thinks that the reset in NKE shares following the fiscal Q2 print provides a better entry point for investors, given the expected recovery in the company’s margins in fiscal years 2025 to 2027.

    While the revised revenue outlook might trigger a debate about macro versus brand-specific headwinds, the analyst remains bullish on NKE as its $2 billion cost-savings plan, gross margin improvement opportunity, and “focus on scaling new product still provide visibility to mid-teens+ EPS growth in F2025-2027E supporting a more attractive entry at ~25X P/E on F2025E.”

    In his research note, Komp also highlighted Nike’s several other positives, including the company’s brand strength, solid execution, competitive positioning and digital leadership.

    Komp holds the 376th position among more than 8,600 analysts on TipRanks. His ratings have been successful 53% of the time, delivering a return of 13.6%, on average. In addition, see Nike Hedge Funds Trading Activity on TipRanks.

    Micron Technology

    Finally, we move to the semiconductor company Micron Technology (MU), which is one of the largest providers of memory and storage chips in the world. The company recently reported strong results for the first quarter of fiscal 2024 and issued solid guidance.

    The company expects its business fundamentals to improve throughout this year and is optimistic about capturing the growing demand for AI solutions.

    Following the upbeat results, JPMorgan analyst Harlan Sur reaffirmed a buy rating on MU stock and raised the price target to $105 from $90. The analyst thinks that the company’s fiscal first quarter results and better-than-projected guidance for the fiscal second quarter reflect improved demand trends and normalization of excess customer inventories.

    The analyst said that these favorable developments are driving higher prices for DRAM and NAND products across several markets such as smartphones, PCs, Internet of Things (IoT), automotive and the industrial sector. While the demand in data center and enterprise end-markets remains a bit soft, management expects the excess inventory situation among its customers to improve and reach more normal levels during the first half of this year.

    “We believe the stock should continue to outperform through 2024 as the market continues to discount improving revenue/margin/earnings power into CY25,” said Sur, calling MU one of his top semiconductor picks for 2024.

    Sur ranks No. 98 among more than 8,600 analysts tracked by TipRanks. His ratings have been successful 67% of the time, with each delivering an average return of 19.6%. In addition, see Micron Financial Statements on TipRanks. 

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  • The top 10 things to watch in the stock market Monday

    The top 10 things to watch in the stock market Monday

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    The top 10 things to watch Monday, Dec. 11

    1. U.S. stocks are muted Monday following last week’s push to a new 52-week high in the S&P 500, helped by a stronger-than-expected jobs report Friday. Good economic news is good news for the stock market, for now, with investors looking ahead to Tuesday’s consumer price index report. But we’ll learn what the Federal Reserve makes of the state of the labor market and inflation when the central bank convenes this week for its final meeting of the year.

    2. Bank stocks like Club name Wells Fargo became “extraordinary performers” last week, according to Jim Cramer’s Sunday column. “The percentage gains for bank shares and the pretty stock charts, all wondrous, look like they are in their infancy,” he writes.

    3. Health insurer Cigna abandons its pursuit to acquire Club holding Humana — a deal that was misguided from the start because it never would have received regulatory approval. Cigna announces a new $10 billion stock buyback. And shares of Humana rally roughly 2% in premarket trading.

    4. Occidental Petroleum announces plans to buy privately held CrownRock for $12 billion in cash and stock, while raising its quarterly dividend by 4 cents, to 22 cents per share. Before the deal announcement, Morgan Stanley had upgraded Occidental to overweight from equal weight, with an unchanged price target of $68 a share.

    5. More analysts are warming up to energy stocks after last week’s carnage. Citi upgrades Club holding Coterra Energy, along with EQT and Southwestern Energy, to a buy. Coterra is the firm’s top large cap pick, with a $30-per-share price target based on capital-efficiency improvements.

    6. Goldman Sachs upgrades Abbvie to buy from neutral, with a $173-per-share price target. The firm cites revenue that has proved more resilient than expected, along with the drug maker’s recent deployment of capital to build out its pipeline. Over the past two weeks, Abbvie has shelled out nearly $20 billion in cash to acquire ImmunoGen and Cerevel Therapeutics.

    7. JPMorgan raises its price targets on a handful of cybersecurity stocks, including CrowdStrike (to $269 a share from $230), Club name Palo Alto Networks ($326 from $272) and Zscaler ($212 from $200).

    8. Citi upgrades Nike to buy from neutral, while raising its price target on the stock to $135 a share, up from $100. The firm sees margin recovery beginning in the second quarter of next year through 2025, helped by easing freight costs, leaner inventories and a shift to direct-to-consumer.

    9. Jefferies upgrades Best Buy to buy from hold, while raising its price target to $89 a share, up from $69. Analysts at the bank think this call won’t take much to work, with expectations low and the stock cheap and yielding a 5% dividend.

    10. Citi resumes coverage of Club holding Broadcom with a buy rating and $1,100-a-share price target. The firm sees the chipmaker’s artificial-intelligence business offsetting the cyclical downturn in the semiconductor business, along with strong accretion from its recent acquisition of VMware. We thought the company reported a better quarter last Thursday than what the market gave it credit for. 

    (See here for a full list of the stocks at Jim Cramer’s Charitable Trust.)

    What Investing Club members are reading right now

    As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

    THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER.  NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB.  NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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  • Nike has a better risk-reward profile over Lululemon, says Wells Fargo's Boruchow

    Nike has a better risk-reward profile over Lululemon, says Wells Fargo's Boruchow

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    Share

    Ike Boruchow, Wells Fargo Securities senior analyst, joins ‘Squawk on the Street’ to discuss why Boruchow favors Nike over Lululemon, clues from the holiday shopping season that may have influenced Wells Fargo’s decision, and much more.

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  • Tuesday’s analyst calls: Retail stocks that can win, trouble ahead for home improvement names

    Tuesday’s analyst calls: Retail stocks that can win, trouble ahead for home improvement names

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  • These are Jefferies ‘rock-solid’ dividend stock picks

    These are Jefferies ‘rock-solid’ dividend stock picks

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  • Nike misses revenue expectations for the first time in two years, beats on earnings and gross margin

    Nike misses revenue expectations for the first time in two years, beats on earnings and gross margin

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    A shopper leaves a Nike store along the Magnificent Mile shopping district with a purchase in Chicago, Dec. 21, 2022.

    Scott Olson | Getty Images

    Nike reported revenue Thursday that fell short of Wall Street’s revenue expectations for the first time in two years, but it beat on earnings and gross margin estimates.

    Here’s how the sneaker giant performed during its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

    • Earnings per share: 94 cents vs. 75 cents expected
    • Revenue: $12.94 billion vs. $12.98 billion expected

    The company’s reported net income for the three-month period that ended August 31 was $1.45 billion, or 94 cents per share, compared with $1.47 billion, or 93 cents per share, a year earlier.

    Sales rose to $12.94 billion, up about 2% from $12.69 billion a year earlier.

    Nike shares rose by about 1% in extended trading Thursday.

    Investors have been laser focused on Nike’s recovery in China, its relationship with its wholesale partners and how the resumption of student loan payments will impact sales. 

    They’re also keen to see Nike’s margins recover after bloated inventories, high promotions and supply chain woes contributed to lower profits over the last few quarters. 

    During the quarter, Nike’s gross margin fell about 1 percentage point to 44.2%, but it was higher than the 43.7% analysts had expected, according to StreetAccount.

    Sales in China grew by 5% compared to the year-ago period to $1.74 billion, which fell short of the $1.84 billion analysts had expected, according to StreetAccount.

    During the previous quarter ended May 31, Nike saw China sales jump 16% compared to the year-ago period. But the numbers were against easy comparisons because the region was still under Covid-related lockdown orders during the prior year. 

    While Nike remains bullish on China, the region’s economic recovery has so far been a mixed bag. Following a sluggish July, retail sales picked up during the month of August to rise 4.6% compared to the prior year, beating expectations of a 3% growth forecast by Reuters. 

    When it comes to its wholesale revenues, Nike’s relationship with those partners have been rocky. As the company has pivoted to a direct-to-consumer model, it has focused on driving sales online and in its stores at the expense of its wholesale accounts. 

    However, as Nike grappled with excess inventories throughout 2023, it relied on those partners to move through that merchandise. It has now restored its relationship with both Macy’s and DSW – accounts that it previously cut in favor of its DTC strategy. 

    Some analysts expected Nike’s wholesale revenue to be sluggish during the quarter because excess inventories have been a problem throughout the retail industry – and some wholesalers are being more particular in what they order to avoid another backlog. 

    Wholesale revenue during the quarter was flat compared to the year-ago period at $7 billion.

    Amid decades-high inflation rates, consumers have been pulling back on apparel and footwear. With the resumption of student loan payments looming ahead, some analysts expect those sectors to take an even greater hit. 

    Jefferies conducted a survey on U.S. consumer spending and found 54% of respondents plan to spend less on apparel and accessories. Meanwhile, 46% plan to spend less on footwear, which doesn’t bode well for Nike. 

    It may still be too early to gauge the impact of student loan payments on Nike. Its first quarter ended in late August, and payments aren’t set to resume until October.

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  • Jefferies downgrades Nike to hold from buy. Here’s what the pros say to do next

    Jefferies downgrades Nike to hold from buy. Here’s what the pros say to do next

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  • What China’s resilient big spenders are buying and the stocks that benefit

    What China’s resilient big spenders are buying and the stocks that benefit

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  • Nike beats sales expectations, misses on earnings as margins drop

    Nike beats sales expectations, misses on earnings as margins drop

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    A customer enters a Nike store along the Magnificent Mile shopping district on December 21, 2022 in Chicago, Illinois. 

    Scott Olson | Getty Images

    Nike reported mixed fiscal fourth-quarter earnings on Thursday, as lower margins weighed on profits.

    Here’s how the sneaker giant performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

    • Earnings per share: 66 cents vs. 67 cents expected
    • Revenue: $12.83 billion vs. $12.59 billion expected

    The company’s reported net income for the three-month period that ended May 31 was $1.03 billion, or 66 cents per share, compared with $1.44 billion, or 90 cents a share, a year earlier. 

    Sales rose to $12.83 billion, up about 5% from $12.23 billion a year earlier.

    Investors have been eager to see if Nike managed to improve its bloated inventory levels, which have weighed on its margins. 

    Nike’s margins fell again this quarter, this time by 1.4 percentage points to 43.6%. The company attributed the drop to higher product input costs, elevated freight and logistics costs, an uptick in promotions and unfavorable currency exchange rates.

    Other retailers that reported earnings recently noted freight and logistics costs had gone done for them and proved to be a boon for their margins.

    Inventories came in at $8.5 billion, flat compared with the prior-year period.

    In March, executives said on a call with analysts they were “increasingly confident” the company would be able to exit the fiscal year with healthy inventory levels. They noted sales momentum could lead to “even leaner inventory” than anticipated. 

    Nike has been relying on its wholesale partners to reduce inventory levels. The push boosted its wholesale revenue over the past few quarters, but didn’t help its margins much.

    The company said in March that it expects revenue from that segment to moderate moving forward. Still, Nike recently restored some of the wholesale relationships that it cut when it first began focusing on its direct-to-consumer strategy in 2020.

    Both DSW and Macy’s will start selling a range of Nike merchandise again in October, the retailers both announced in June. 

    Macy’s hasn’t received a shipment from Nike since December 2021, but will now resume selling its apparel, including plus size women’s, big and tall men’s, kid’s, bags and other gear, the department store told analysts during an earnings call. Nike’s more premium offerings appear to be off the table for sale at Macy’s.

    The decision to bring Macy’s and DSW back under the Nike fold has left some investors wondering if the company is moving away from its direct-to-consumer strategy. 

    Investors have also been curious to see how sales have rebounded in China following Covid lockdowns. During Nike’s holiday quarter, China sales came in below estimates. The country overall has since seen an uneven path of economic recovery.

    In April, retail sales in China rose 18.4% but came in lower than economists’ forecast of 21%.

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  • Nike’s approach to solving the biggest problem for girls in sports

    Nike’s approach to solving the biggest problem for girls in sports

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    Portland Press Herald | Portland Press Herald | Getty Images

    In recent decades, data from sports researchers revealed an encouraging trend: young girls were participating in sports in greater numbers. But the research also uncovered a big missed opportunity. Girls drop out of sports at “alarming rates,” specifically when they hit puberty.

    There is one obvious solution that sports retail giant Nike CEO John Donahoe, and many others, think can make a big difference: more female coaches.

    In the historically male-dominated world of sports, girls and women have always had to fight for their right to compete and to be viewed as competitive athletes. The sexism that has prevented girls from competing in sports has also prevented women from becoming youth coaches.

    “I think league administrators are kind of trained to look for dads to coach and think more often the dads are going to be the ones to step up and do it. I think sometimes they may not even be trying to recruit females,” said Mary Fry, professor and director of the University of Kansas Sport & Exercise Psychology Lab.

    Nearly 75% of youth head coaches are men, according to Aspen Institute’s Project Play. Even when women are offered the opportunity to coach, they are fearful that they’re not good enough to take on such a position because of the sexist stereotypes society often promotes.

    When Jen Welter, the first-ever female NFL coach and a two-time gold medalist in Olympic football, was offered the opportunity to coach football for the first time, she recalled instinctively thinking “girls don’t do that.”

    “When you don’t see it, it’s really hard to say, ‘You know what, I can do that,'” Welter said.

    “Most young people rarely, if ever, get the opportunity to be coached by a woman. This is a miss for all,” said Vanessa Garcia-Brito, Nike vice president, and chief social and community impact officer. “To get girls active and invite them into a lifetime of sport, they have to see it to believe it – and that starts with more female coaches.”

    In March, Nike launched Coaching HER in a partnership with the University of Minnesota’s Tucker Center for Research on Girls & Women in Sport. The digital coaching resource is designed to help coaches of all genders improve their understanding of gendered bias and discrimination in sports.

    Puberty changes girls’ relationship with sport

    Female coaches are not just important in terms of giving young girls a positive role model – they also offer a safe space to discuss and process the difficulties that can come with a young woman’s changing body and mind. Even for girls who grew up loving sports, puberty shifts girls’ relationship with sports and very often results in them disengaging with physical activity.

    The data related to this critical period in a girl’s life is clear. One in three girls participate in a sport from age 6-12, according to the Aspen Institute. But nearly one in two girls will quit sports during puberty, according to menstrual product manufacturer Always.

    Research from a 2018 report by Tucker Center, Nike’s partner, gathered data globally and found that the highest rate of drop-off from girls in sports often occurs between the ages of 11 to 17, “the range when girls feel the most pressured to conform to identities shaped by their peers and adults — which includes coaches,” its report states, and it concluded that how girls feels about their coaches is a determining factor in whether they continue to play organized sports.

    The Women’s Sports Foundation, created by Billie Jean King, has found that 40% of teen girls are not actively participating in a sport.

    “For boys, that moving through puberty can be kind of a plus, you gain more muscle mass, and you get taller, stronger. For girls, it’s just not always the same case,” Fry said. “They’re kind of in survival mode in middle school.”

    There are both physical and psychological dimensions to the problem, namely, periods and low body confidence as barriers preventing girls from continuing in sports, according to Youth Sport Trust CEO Alison Oliver. As girls’ bodies change throughout puberty, they become increasingly insecure and physical activity begins to feel different. The charity Women in Sport found that 65% of girls don’t like others watching them during sports, as it makes them feel self-conscious, vulnerable, and objectified. What’s more, seven in 10 girls avoid being active when on their period.

    Coaches are critical agents that impact girls’ experiences in sports, according to the Women’s Sports Foundation, and if a girl isn’t properly supported or understood by their coach in a time as daunting as puberty, they’re going to be discouraged to compete. For example, most of the time, girls are not educated on or fitted for proper sports bras, making participating in sports painful.

    “If you started to feel uncomfortable as a female athlete … it’d be pretty tough to go to a male coach about some of those things,” Welter said.

    A June 2019 Nike event in London when it took over iconic recreational sports park Hackney Marshes for a football festival to celebrate the women’s game, hosting more than 1,000 women and girls, with 79 teams taking part in the tournament, across different age groups.

    Kate Mcshane | Getty Images Sport | Getty Images

    “These bonds that develop between a coach or a mentor and the kids is just so much bigger than just the physical activity part of it,” Fry said. “They have women in their lives they can bounce things off of, they can trust.”

    Fry co-founded the Strong Girls program at the University of Kansas, where young girls are assigned a female college student as their mentor. Half of the program focuses on participating in sports together, while the other half concentrates on positive youth development. The program typically attracts girls who tend to be less athletic and creates a safe environment where they feel encouraged by female mentors to participate in sports that they normally wouldn’t pursue.

    “Girls and women can’t have enough strong women in their lives. We just benefit from that,” said Fry, who is director of the program.

    Female coaches were fundamental to both the success and enjoyment of sports for Christina Collins, a former youth athlete who later became a coach. “I had female coaches, as well as male, of course, and it [had] such an impact on me to realize that it was an option for me to grow up and do that. And I felt like I definitely connected with them at a deeper level than I might have [with] male coaches that I had,” said Collins, who is now a physical education and health teacher in Westchester County, and a professor in the physical education masters program at Manhattanville College.  

    Female coaches, she says, can offer unique insight based upon their own personal experiences as women. “[My identity] has impacted the way in which I deliver all coaching. It is meant to increase first and foremost the child’s confidence, then second, their performance ability,” said Collins, who also is founder and owner of NeverStopMoving365, a company that seeks to use sports and physical activity to promote confidence and teach life lessons. 

    She says this approach isn’t only benefit to girls, but extends to youth athletes of all genders, and female coaches as well. 

    Nike’s 20,000 female coach goal

    Nike is one of the few major companies directly addressing this issue. Corporations from Target to Disney and Bank of America are being targeted for taking a stand on social issues in the current divisive political climate. Donahoe, who made his comments on the issue of girls’ sports participation rate at the recent CNBC CEO Council Summit in Santa Barbara, California, said that he believes Disney CEO Bob Iger is handling the feud with Florida Governor Ron DeSantis properly, and he pointed to Nike’s efforts in girls’ youth sports as another example of how a company can focus on social issues that are core to its values and integral to its brand.

    “We’re trying to train 20,000 female coaches, moms and other former athletes to be coaches to promote youth,” Donahoe said. “So that’s less of a controversial issue, but it’s one we care about as a value,” he said. 

    Nike also has an aim to achieve 50% girl participation in the sport-based community programs it supports by 2025.

    As a former athlete, Collins says there are lifelong benefits that come when young women and girls remain involved with sports and feel supported.  

    “I don’t use the actual sports as my primary form of fitness, or just the sports skills in general at all. But I pull from my toolkit of life lessons that athletics taught me,” she said. 

    Coaching HER encourages all coaches, regardless of gender, to give girls the chance to continue developing their character and learning life lessons from sport, and offers detailed training for coaches on how to lead girls and young women in sports.

    “It’s not just women, for women. It’s women and men working together to elevate girls. That’s one of the key components. How do we work better together?” Welter said.

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  • Grizzlies star Ja Morant suspended for 25 games after latest gun video

    Grizzlies star Ja Morant suspended for 25 games after latest gun video

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    Ja Morant of the Memphis Grizzlies brings the ball upcourt during the game against the Los Angeles Lakers during Game Five of the Western Conference playoffs at FedExForum in Memphis, Tennessee, April 26, 2023.

    Justin Ford | Getty Images

    The National Basketball Association suspended Ja Morant for 25 games after the Memphis Grizzlies star brandished a gun on a live video for the second time, the league said Friday.

    Morant’s suspension will take effect at the start of the upcoming season. The NBA said Morant will have to meet unspecified “conditions” before he returns to the court and will not be able to participate in team or league activities, in addition to preseason games.

    Morant, a 23-year-old NBA All-Star, first waved a gun in a livestream from a night club in March, prompting an eight-game suspension. He then displayed a firearm in a car with friends during a second video stream last month.

    “Ja Morant’s decision to once again wield a firearm on social media is alarming and disconcerting given his similar conduct in March for which he was already suspended eight games,” NBA Commissioner Adam Silver said in a statement Friday.

    Silver added that “basketball needs to take a back seat at this time. Prior to his return to play, he will be required to formulate and fulfill a program with the league that directly addresses the circumstances that led him to repeat this destructive behavior.”

    In a statement to ESPN on Friday, Morant apologized and promised he is “going to be better.” He said he would spend the offseason working on his mental health.

    “I hope you’ll give me the chance to prove to you over time I’m a better man than what I’ve been showing you,” he said.

    Morant is endorsed by Nike and Coca-Cola‘s Powerade, but the drink company has pulled an ad featuring the NBA star and scrubbed him from social media.

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  • House China committee targets top clothing brands in forced labor inquiry

    House China committee targets top clothing brands in forced labor inquiry

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    A shopper carries a bag of Nike merchandise along the Magnificent Mile shopping district on December 21, 2022 in Chicago, Illinois. 

    Scott Olson | Getty Images

    WASHINGTON — A House committee examining the U.S. government’s economic relationship with China is asking some of the world’s largest clothing companies for information about the use of forced labor during production — a potential violation of U.S. trade law.

    Lawmakers asked retailers Temu, Shein, Nike and Adidas North America about the use of materials and labor sourced from the Xinjiang Uyghur Autonomous region of China, according to letters sent to company leaders on Tuesday. Such practices would constitute violations of the 2021 Uyghur Forced Labor Prevention Act, according to the lawmakers.

    Congress passed the UFLPA with bipartisan support after the State Department determined China is “committing genocide against Uyghurs and other minority groups in Xinjiang.”

    The letters were sent to Rupert Campbell, president of Adidas North America; Qin Sun, president of Temu; Chris Xu, CEO of Shein and John Donahoe, president and CEO of Nike, Inc. They were signed by Reps. Mike Gallagher, R-Wisc., chair of the House Select Committee on the Chinese Communist Party, and Ranking Member Raja Krishnamoorthi, D-Ill.

    “Using forced labor has been illegal for almost a hundred years—but despite knowing that their industries are implicated, too many companies look the other way hoping they don’t get caught, rather than cleaning up their supply chains. This is unacceptable,” Gallagher in a statement. “American businesses and companies selling in the American market have a moral and legal obligation to ensure they are not implicating themselves, their customers, or their shareholders in slave labor.”

    The inquiries also follow a March hearing of the committee that included an expert assessment finding that U.S. companies finance “state-sponsored forced labor programs in the Uyghur region.”

    The lawmakers requested responses to their questions, including the identity of materials suppliers, supply chain policies and audit measures for suppliers, by May 16.

    Representatives for the companies did not immediately respond to requests for comment from CNBC.

    The latest inquiries follow a separate bipartisan effort earlier this week urging the Securities and Exchange Commission to require Shein to certify it does not use Uyghur labor before the company can expand into the U.S. market. Shein has denied the accusation.

    Chinese brands Shein and Temu, which is owned by Chinese parent company PDD Holdings, are also accused of capitalizing on a 90-year-old loophole to avoid tariffs on many goods sold directly to U.S. consumers, the lawmakers said Tuesday.

    The lawmakers say Shein and Temu rely heavily on the de minimus provision of Section 321 of the Tariff Act of 1930 to waive import tariffs if the fair retail value of in the country of shipment does not exceed $800.

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  • Top analysts are bullish on these five long-term picks

    Top analysts are bullish on these five long-term picks

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    People walk past a store of the sporting goods retailer Nike Inc at a shopping complex in Beijing, China March 25, 2021.

    Florence Lo | Reuters

    Investors seem to be caught amid the chaos caused by the recent banking crisis, persistent macro headwinds and a potential recession. Looking at stocks with appealing long-term potential could help in these times. 

    Here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

    Nvidia

    At the recently held GTC event, chip giant Nvidia (NVDA) discussed its partnerships with leading businesses to advance new artificial intelligence (AI), simulation, and collaboration capabilities across various industries.

    Based on the event, Mizuho analyst Vijay Rakesh inferred that demand for Nvidia’s AI solutions strengthened in the past month, driven by the continued momentum for OpenAI’s ChatGPT and large language models (LLMs) processing. Rakesh highlighted Nvidia’s two new products – L4 tensor core GPU and H100 NVL, which are “focused on improving throughput and power as well as expanding inference.”

    Rakesh expects Nvidia’s DGX Cloud AI supercomputing service to drive additional sales. He also mentioned a “key win” for Nvidia in the auto space, with leading new energy vehicle company BYD expanding the use of the Nvidia Drive Orin platform to a wider range of vehicles. This, along with collaborations with other EV makers, represents a $14 billion automotive design win pipeline for Nvidia.

    Calling Nvidia his top pick, Rakesh reiterated a buy rating and raised his price target to $290 from $230. He sees Nvidia as a “leader in fast-emerging generative AI training and inference as well as dominating gaming and broader AI/accelerated compute, despite near-term investor concerns over consumer and data center slowdown into 2023E.”

    Rakesh holds the 94th position among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 17.3%. (See Nvidia Stock Chart on TipRanks)

    Nike

    From semiconductors, we jump to athletic apparel and footwear maker Nike (NKE). The company recently reported better-than-expected results for its fiscal third quarter (ended Feb. 28). However, Nike’s gross margin contracted significantly due to higher markdowns, which were made to liquidate elevated inventory levels. The margin was also affected by increased input costs and a rise in freight expenses.

    Baird analyst Jonathan Komp, who ranks 290th out of more than 8,300 analysts followed on TipRanks, noted that, while Nike’s inventory was up 16% year over year in the quarter third quarter, it declined about 5% sequentially. He highlighted that the company is now targeting “steeper” liquidation in the fiscal fourth quarter.  

    Komp also noted management’s commentary about the recovery in greater China. The analyst sees strong margin expansion in the next fiscal year helped by an expected recovery from the “transitory impacts” on gross margin and expansion of the direct-to-consumer mix. 

    Komp reiterated a buy rating on Nike and increased his price target to $138 from $130. “NKE remains attractive given positive brand momentum and competitive positioning, high operating margin (low earnings sensitivity), and reasonable valuation (NTM P/E premium vs. S&P +82% compared to +71% five-year average),” the analyst wrote.

    Komp has a success rate of 54%, and each of his ratings has returned 14.1% on average. (See Nike Insider Trading Activity on TipRanks)

    Lululemon

    Another athletic play on our list is Lululemon (LULU). This week, the company impressed investors with upbeat results for the fourth quarter of fiscal 2022 (ended January 29, 2023) and solid guidance. However, the quarter’s margins were impacted by markdowns.

    Nonetheless, management expects inventory growth to continue to moderate in the first quarter of fiscal 2023 and to deliver robust gross margin expansion fueled by lower airfreight. (See Lululemon Hedge Fund Trading Activity on TipRanks)

    Following the print, Guggenheim analyst Robert Drbul increased his price target for Lululemon stock to $440 from $400 and reiterated a buy rating, saying the company remains his “favorite growth story in 2023.” The analyst thinks demand for Lululemon’s merchandise remains solid, noting that concerns about competitive pressures from emerging athletic brands seem “overestimated.”

    The analyst expects Lululemon to benefit from China reopening. He anticipates the significant growth potential in the region to help the company achieve its target to quadruple international revenues by 2026. He also highlighted limited seasonality in Lululemon’s offerings, “virtually no wholesale exposure,” and a strong e-commerce business.

    “We also see ample runway for growth in men’s, digital, and international, while LULU continues to deliver strong growth in its “core” (women’s, stores, and North America),” said Drbul. The analyst ranks 439th among more than 8,000 analysts followed on TipRanks. Additionally, 61% of his ratings have been profitable, with an average return of 7.4%.

    Wynn Resorts

    Casino operator Wynn Resorts (WYNN) has “healthily outperformed” the gaming sector and broader market so far in 2023, noted Deutsche Bank analyst Carlo Santarelli. The analyst remains bullish on the stock and raised his price target to $134 from $128, as he continues to see a “meaningful upside.”

    The drivers behind Santarelli’s bullish view include an “inexpensive” valuation, continued sequential increase in Macao visitation and stronger-than-anticipated Macao margins due to expense reductions and a favorable gaming floor revenue mix. (See Wynn Blogger Opinions & Sentiment on TipRanks)

    Santarelli is also optimistic about the prospects of the company’s UAE project — an integrated resort that will be located on the man-made Al Marjan Island in Ras Al Khaimah, UAE. The analyst expects the company to provide more details about this project in the coming months, driving investors’ attention to the new growth opportunity.

    Santarelli raised his estimates for Wynn, citing “Macau QTD trends, continued strength in Las Vegas, and steady performance at Encore Boston Harbor.” Santarelli holds the 27th position among more than 8,000 analysts on TipRanks. He has a success rate of 64%, with each of his ratings generating an average return of 20.6%.

    Dave & Buster’s Entertainment

    Restaurant and entertainment chain Dave & Buster’s (PLAY) delivered strong fiscal 2022 fourth-quarter (ended Jan. 29) results, driven by robust comparable walk-in sales growth and the continued recovery in the special events business.  

    Management stated that quarter-to-date comparable store sales for the fiscal 2023 first quarter were in the flat to very low-single-digit negative range. Jefferies analyst Andy Barish feels that this trend reflects “some noise” due to the post-Omicron demand surge seen in the prior-year quarter and a spring break shift.

    Nonetheless, Barish noted that the underlying momentum experienced in January has continued and sales trends are higher compared to the pre-pandemic period. The analyst expects strength over the near term, as “consumer appetite for experiences” looks solid, driven by modest pricing compared to the industry average, promotional offers and other factors.

    Barish reiterated a buy rating on Dave & Buster’s with a price target of $60, concluding, “PLAY remains among best positioned to drive upside and accel growth the next few years, even in a recession.”

    Barish is ranked No. 465 among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 9%. (See PLAY Financial Statements on TipRanks) 

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